Is Club Brugge worth 510 million euros, or almost twice as much as the Dutch Ajax? According to Berenberg, one of the banks that guides the West Flemish club to the stock exchange, this is not an unrealistic estimate. Experts nevertheless question this appreciation, especially given the many uncertainties in the file.
Berenberg places a valuation somewhere between 460 and 560 million euros on Club Brugge, as is widely known. It is a calculation based on the expected cash flows in the coming years, a DCF analysis (‘discounted cash flows) in the jargon. If we take the middle of that fork, you end up with 510 million euros.
Calculated with 15 percent ‘IPO discount’, the discount that is often given to encourage large investors to go public with an IPO, the valuation comes to 433 million euros. In comparison: Ajax is worth around 290 million euros on the stock exchange. Club Brugge would therefore be worth about half to almost double, according to the above calculations.
However, there are at least five uncertainties that could put pressure on the high valuation.
1. Will the new stadium be built?
Club Brugge is planning to move to a new football stadium, located next to the existing Jan Breydel Stadium. The opening is aimed at the 2023-2024 season. The West Flemish club says it has “a solid, highly visible income base, with considerable upside potential due to the development of a new stadium”. The extra income that the new football temple with 40,000 seats would generate will therefore be added to it.
Still, several analysts see the new stadium, possibly resulting in a doubling of revenues on match days, as crucial for Club Brugge to endure the comparison with clubs such as Ajax. In view of the procedural layers of the past fifteen years, it is therefore best for prospective investors to properly calculate the risks of legal opposition from, for example, local residents, their reasoning continues.
Experts point not only to the recent history of Club, but also to the agony of AS Roma ailing AS Roma on the stock exchange. In March 2014, the then main shareholder of the Roman club presented the plans for a new stadium, which will certainly be put into use from the 2016-2017 season. Today, however, AS Roma still plays in the legendary, but dilapidated Stadio Olimpico. The new main shareholder Dan Friedkin confirmed earlier this month that the 2014 stadium plan may be scrapped altogether.
2. Are the income from transfers recurring?
In recent years, Blauw-Zwart has impressed not only on the field, but also off it with its profitable transfer policy. A point of discussion is whether such transfer profits should be seen as one-off income or as annual recurring. That saves a sip on the drink in the valuation models.
“Now Club Brugge is lumping the annual recurring and one-off company profits together, while these are separate rivers with separate value. To make transfer gains recurring, you would need to have a talent school, ”says one observer.
Club Brugge itself says it counts on its technological know-how. “Thanks to our advanced, data-driven and risk-mitigating scouting and proprietary development strategy, Club Brugge can uniquely respond to transfer market opportunities by identifying talented people locally and internationally and preparing them for careers in bigger leagues.”
3. Will Club Brugge remain a regular customer of the Champions League?
Club Brugge points out that it has played in the group stage of the Champions League in 4 of the past 5 seasons. That is the European football arena where by far the most money can be made. It is of course possible that this top series will continue in the coming years, but that is by no means a certitude for two reasons.
- First of all, old rivals such as Sporting Anderlecht or ‘new’ challengers such as FC Antwerp can make an attempt in the coming years to break through Club’s hegemony and steal the direct ticket for the Champions League.
- But above all: from next season, the European coefficient of the Belgian clubs will come under heavy pressure, because the top season 2016-2017 falls from the five-year calculation. It is quite possible that the Belgian national champion of 2023 is no longer directly qualified for the CL group stage.
4. What are the consequences of a European Super League?
And the Champions League itself may also be in jeopardy. Rumors have been circulating for several years about the launch of a European super league in which only the mega clubs from the four biggest leagues (England, Spain, Germany and Italy) plus the immensely rich PSG would participate.
When that ‘tearing off’ comes, the Champions League, so lucrative for Club Brugge, will be heavily relegated. Today, medium-sized clubs that can qualify for the group stage have a view of one or more top posters anyway. This is no longer the case in the constellation with a Super League.
For the stock exchange listing, this could mean that large international investors completely ignore Club Brugge and prefer larger listed names, such as Manchester United, Juventus Turin or Borussia Dortmund.
5. What is the further fallout from corona?
Unlike Club Brugge in the announcement of the IPO, AS Roma explicitly mentioned the corona pandemic in its latest financial report as a risk that could play a role in the near future. Other European clubs are also taking into account additional black snow as a result of the epidemic.
“Negative developments in the Covid 19 pandemic could again lead to the interruption or cancellation of competitions, which could negatively impact revenues from TV rights, sponsorship deals, ticket revenues and other commercial revenues,” warns AS Roma on its own club finances.